Liz Crowhurst - Cultivating world leading sectors
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The document discusses the UK government's industrial strategy and focus on developing world-leading sectors. It identifies five key sectors - automotive, life sciences, aerospace, construction, and creative industries - based on criteria like existing advantages and future opportunities. The strategy aims to boost productivity, reduce regional inequalities, and improve living standards through both horizontal enabling policies and sector-specific initiatives like public procurement, skills development, and technology innovation. Brexit adds uncertainty that the industrial strategy must address to continue building on the success of sectoral approaches.
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Liz Crowhurst - Cultivating world leading sectors
- 1. What next for …. Cultivating world leading sectors Liz Crowhurst, CBI Senior Sector Advisor, Government & Defence
- 2. 2 The UK’s Premier Business Organisation The CBI are the UK’s largest and most influential business organisation. We provide our members with the access, influence and insight required to plan ahead with confidence to grow. We represent their views as we work with policymakers to deliver a healthy environment for businesses to succeed, create jobs and ultimately, drive economic growth and prosperity. During this period, the UK’s business community faces real challenges, from the impact of the EU negotiations to the implementation and remit of the government’s apprenticeship levy.
- 3. 3 Three key challenges facing business in 2017/18 • Brexit • Skills • Political environment • Demonstrating the value of business •
- 4. 4 Demonstrating The value of business • • • • 53% of people believe that business makes a positive contribution to society
- 5. 5 Industrial Strategy ”A modern Industrial Strategy will be a landmark opportunity to build a successful, modern economy as the foundation for a prosperous, fairer and more inclusive society” Carolyn Fairbairn, Director General, CBI 1. Boost lagging productivity 2. Remove regional inequalities 3. Improve living standards and wages
- 6. 6 Industrial Strategy: The role of world class sectors • Build on existing sector-led approaches to industrial strategy • Exploit the fact that the UK is home to some of the world-leading innovative sectors • BUT this should not be about ‘picking winners’ through subsidies or import tariffs •
- 7. 7 Which sectors? The CBI has set out five key selection criteria for identifying sectors that would maximise the benefit of an industrial strategy to the UK: 1) Where the UK already has a core advantage 2) A reputation for excellence from factors such as brand, quality, design and innovation, productivity and price 3) Market access and supply 4) Strategic industries 5) Future opportunities as the world changes
- 8. 8 Keep sector strategies simple and effective Key factors included: • Clear leadership • Self-defined sector • Sector champions • Good governance • Content of sector deals: • Original/innovative • Analysis of pros and cons • Include entire sector • Focussed proposals The CBI recently hosted a Trade Association roundtable with BEIS on sector deals to try and identify what a “good” sector deal could look like and how deals will be prioritised.
- 9. 9 Automotive
- 10. 10 Life sciences
- 11. 11 Integrating sectors with place-based strategies
- 12. 12 Horizontal vs Vertical Includes enabling policies such as: • Regulation • Investment in skills • Access to finance • Business export support Sector specific policies including: • Innovation in specific technologies • Public procurement • Targeting support for investment and exports
- 13. 13 ‘tilting the playing field’ in favour of sectoral strengths ‘ 1. Public procurement 2. Initiatives to tackle sector skills shortages 3. Innovation in specific technologies and their commercialisation
- 14. 14 harnessing public procurement to drive sector productivity
- 15. 15 Tackling sector skills shortages
- 16. 16 Innovation in specific technologies • 94% of businesses stated that digital technologies are a crucial driver of increased productivity. • The UK ranks 5th in the availability of technology, but only 14th on company level adoption •
- 18. 18 Key Takeaways • The CBI welcomes the governments commitment to taking a sector-led approach to industrial strategy • Looking ahead, it is vital that this approach continues to build on existing sectoral successes and that more clarity is provided regarding the basis for future sector deals • Where deals are agreed, strategies should be kept simple and government should see its role primarily as a facilitator for the private sector • This should be combined with a place-based approach to unlock regional strengths • Work should also continue to reform public procurement, close skill gaps and harness innovation – and all in the context of ongoing uncertainty surrounding Brexit.
Editor's Notes
- Thank you all for coming and for inviting me to speaktoday. I have really enjoyed the sessions so far and hope this will build on some of themes that have already beenraised,as well as providing a useful look at some of the CBI’s work on this subject.
- For those in the room who are unaware of the CBI and its work, we are UK’s largest and most influential business organisation. Speaking for 190,000 firms, we represent our members views and concerns and operate in twelve UK regions and four overseas offices. We lobby from civil service-level upwards and often partner with likeminded organisations in order to help solve the pressing policy issues of the day. Our mission is, in essence, to create an environment in which businesses can succeed, create jobs and drive economic growth and prosperity forward. Today, I want to speak about the role of world-leading sectors in realising this vision – and more specifically the important role that sectors should play in successfully delivering the government’s industrial strategy.
- BREXIT As I’m sure you will all agree, it is difficult to discuss business challenges and government policy without doing so through the lens of Brexit and the ongoing EU negotiations. As such, I thought this a good place to start! According to a CBI survey of 357 businesses,,over 40% of businesses say that Brexit has affected their investment decisions. Of those, 98% say that the impact has been negative. In particular, companiesreporting that Brexit had negatively influenced their investment decisions cited general uncertainty over the UK’s future relationship with the EU. Businesses are making investment decisions now and need more sense of clarity and continuity to support jobs and prosperity. The Government must work quickly to agree the terms of the transition and future trading arrangements. CBI research shows, for example, that for10% of firms, the deadline for putting contingency plans into action has already passed. For 25% of firms, the deadline for putting contingency plans into action is January 2018. For a further 25% of firms, the deadline is March 2018. More recently, we have seen positive movement from the government on the implementation of a transition period. However, ensuring that the detail of this is now made clear before the end of 2017 is essential. This will allow the business community to avoid turning contingency planning into action planning. In addition, it is also important to note that issues remain and clarity is still needed on citizen’s rights and trade. SKILLS People and skills are at the heart of our economic prosperity. With a good education and the right skills, everyone has the best chance to get a job and get on in their career. Andfor the UK to seize new opportunities and grow, we need a trained and diverse workforce, supported by good business practice and the right policy environment. I will come on to this in more detail in relation tospecific sectorsa little bit later, however it is important to underline that significant skills shortages are facing businesses across the UKeconomy – and to also highlight a couple of cross-industry skills challenges. Firstly, apprenticeshipLevy The levy is now operational and its aim is to increase access to, and the quality of apprenticeships. As an overarching goal this is of course positive, however the levy’s inflexibility has since proven its potential inability to achievethis. While business are committed to investing in schemes, many struggle to fill places: almost half (49%) of respondentsin a recent CBI survey haveexperienced difficulty in recruiting apprentices or expect to do so in the next three years Around a quarter of businesses will be cutting back on non-apprentice training (27%) or curbing their graduate intakes (23%) We would like to see the levyevolve into a more flexible ‘skills levy’to incorporate higher quality training and allow firms to pool their funds in support of local provision. The Government has recently committed to keep the levy under review and this is a welcome step. Secondly, migration Businesses are struggling to recruit and retain European workers following the vote to leave the EU. A CBI member survey told us thatconcernsabout labour shortages caused by a restrictive immigration system was equal, if not slightly higher, than concern about access to skilled workers. This reduction in the supply of EU labour and skills is already having a detrimental impact on the ability of UK firms to deliver the goods and services expected from them by their customers. Quote from one of our small manufacturer members. “So far this year we have already lost 22 EU nationals. Not only is it quantity, but quality. We are seeing our brightest workers leave first as they seek to secure the best jobs elsewhere in Europe before competition increases as more EU nationals leave the UK.” Finally….. POLITICAL ENVIRONMENT Alongside, the significant challenge of deliveringBrexit,businesses must also operate within an unstable political environment General elections, cabinet reshuffles and shifting policy agendas all make this a difficult time to be engaging with government. There has also been a shift way from a pro-business stance in some areas of politics. For example, there has been increased political debate surrounding the nationalisation agenda. TheCBI is clear that taking such steps would undermine government ambitions for lifting productivity, driving innovation and improving living standards.
- More broadly ….. Thereis a growing national and political conversation underway about the role of business in society. Our prosperity as a country is linked to the success of business but business can’t make a full contribution through its expertise, investments and ideas to create a more inclusive economy when people don’t always see the value it creates. Just 53% of people believe that business makes a positive contribution to society Also corporategovernance and executivepay…. Thegovernment have put business behaviour, particularly executive pay, firmly in the spotlight. Business must engage constructively with the wider debate about the different levels of reward and representation across UK business. We are listening to our members and working with government to shape the right mechanisms to deliver these aims. The CBI are clear that firms, like people, are not perfect. But they are a powerful force for good.British companies provide four in every five jobs in the UK and have created two million new ones since 2012.UKbased firms paid £205 billion in tax last year,a quarter more than five years ago and enough to more than cover public spending on the NHS and education combined.
- So addressing these problems…. The CBI have long supported the role that a long-term, consistent industrial strategy can play in boosting growth in the UK. The consensus among our members is that a modern industrial strategy should seek to build confidence and prosperity by unlocking growth and productivity across the regions and nations of the UK. In particular, we think a successful industrial strategy has the potential to have three very significant benefits: Firstly, boosting lagging productivity Paul Krugman, the Nobel Prize-winning economist famously said in 1994 that“Productivity isn’t everything, but in the long run it is almost everything,” and the CBI is clear that raising productivity is the only route to rising living standards, lifting people out of poverty, paying for public services and creating opportunities for our young people. For the UK this issue is critical. Productivity is no higher now than it was just before the 2008 financial crisis in stark contrast to the average annual growth of 2.1 % during the decade before this. And more recently, the government’s independent economic forecaster has admitted it will need to “significantly” lower its estimates for the productivity of UK workers after a decade of stagnant growth. Secondly, removing regional inequalities The Prime Minister has stated that : “our modern industrial strategy is a critical part of our plan for post-Brexit Britain. It will help to deliver a stronger economy and a fairer society – where wealth and opportunity are spread across every community in our United Kingdom, not just the most prosperous places in London and the South East. The CBI’s reportUnlocking Regional Growth,published earlier this year, found that the most productive area of the UK is now almost three times more productive than the least. It also highlighted that nine out of ten UK cities perform below the European average, and more than half are among the 25% least productive cities on the continent. In addition, there is more variation in productivity within the UK’s regions and nations than between them. For example, within the North West, productivity in Cheshire East is 72 percent higher than in Blackpool. Unlocking higher regional productivity could add £208bn to the UK economy over the next decade, according to our research. That's equivalent to an economy that is 10% bigger than it would have been otherwise. And finally,improved living standards and wages It is also vital that the strategy helps improve living standards and increases wages. Inflation has been rising since the end of last year and this is already having a stark impact on living standards due to nominal wage growth remaining tepid - despite the labour market growing strongly. Efforts to improve the economy make sure we are more competitive internationally and have growth right across the UK should ultimately result in improved living standards. This should be the principal measure of whether the industrial strategy succeeds. With the right support, webelieve that the UK’s companies hold many of the answers to meeting these challenges, .
- The CBI have also been clear that the starting point for success should be to build on the sector-led approach to industrial strategy, capitalising on the momentum behind the partnerships that have developed between industry and government in recent years. It should not be forgotten that the UK is already home to some world-leading innovative sectors. These include high-end services, chemicals, life sciences, aerospace, creative industries and automotive. For instance, a quarter of the world’s top 100 prescription medicines were discovered and developed in the UK. Back in 2012, the CBI advocated a sector-led industrial strategy and our members are in broad agreement that this should still continue to form the basis of the UK’s approach. Following the creation and implementation of partnerships between industry and government in the last parliament in sectors such as automotive, aerospace, life science and oil and gas, it is important that we do not lose the momentum that has now been built. Formulated upon the solid bedrock of an internationally competitive business environment for all firms in the areas like tax, regulation, basic educational standards and competition policy, a sector-led approach means taking measures designed to back sectors from across the economy. This should not be about ‘picking winners’ through subsidies or import tariffs, but rather about going with the grain of the market, backing the UK’s existing economic strengths across the economy – from manufacturing to financial services. Itwill also require government to work in long-term partnership with business. Encouragingly, the Industrial Strategy White Paper published last week appears to support these views. The CBIwelcomes the recognition that success will require urgent action in partnership with business and we now urge the Government to continue on this road, moving fast from strategy to action. It is also clear that the Sector Deals that have already been announced are welcome but that this must be seen as the start of a new approach, not the final word. Some sectors, for example, will be disappointed not to have been picked in the first round of deals meaning businesses will want to see further guidance and timeframes on the prioritisation of future Sector Deals.
- The government’s white paper published last week outlines four initial sector deals: construction, life sciences, artificial intelligence and automotive. There are also additional sectors who have already entered into discussions with government including nuclear and creative industries. - As I mentioned, the key now is clarity around the timings for these future deals. Looking ahead, theCBI has set out five key selection criteria for selecting sectors that would maximise the benefits of an industrial strategy to the UK. Where the UK already has a core advantagethe UK’s excellent universities base, with three of the world’s top eight in the UK and 16 in the top 100 naturally lends itself to areas of cutting edge technology, backed further by a mature, innovation-savvy consumer market creating a domestic base for new designs and technologies. A reputation for excellence from factors such as brand, quality, design and innovation, productivity and price.These can come together at a sector level to build strategic advantage encompassing a wider range of industries. For example, Germany has a reputation for high quality engineering because similar strengths are repeated across different sectors and reinforce each other. Market access and supply.Side factors including availability of raw materials or talent or the extent of value chain activity that provides a critical mass for a sector Strategic industries.Those which are very important to the economy or critical to the UK in other ways. This is typically where Industry is, and could remain, a major component of the UK economy in terms of jobs and export potential, there is a long-term need and a UK solution provides advantages such as security of supply e.g. in the UK’s foundation industries such as steel and cement. Future opportunities as the world changes.There is significant growth in emerging markets, changing demographics and shifts towards a low-carbon future all offer real opportunities in areas where the UK holds competitive advantage. What more, with the implications of Brexit not yet clear on the UK’s position in the Single Market we must strengthen the position of our domestic industries. As these five selection criteria make clear, this is not about ‘picking winners’, but about working with the grain of the market to back sectors in which the UK has a natural competitive advantage and real growth prospects for the future. In some areas, sector strategies have already started to deliver benefits, as highlighted in the case studies which I will come on to later. In terms of how government is looking to select which sectors secure adeal. The CBI is hearing that the key considerations are: It’s potential Impact • Ability to deliver • Government support • The inclusion of the key themes of the Industrial Strategy (i.e. productivity, skills and innovation) andalso dealing with the ‘grand challenges’ laid out in the White Paper. (Ageing society, clean growth, AI & data economy and future of mobility) This is backed up by the White Paper.
- Our overarching message remains that government should keep sector strategies simple and effective. In addition, CBI members have been keen to stress that any sectoral approach should be light touch and that the Government should see its role here primarily as a facilitator for the private sector. Government should also retain and refresh existing sectoral commitments, building on their success to date, and take a flexible but focused approach to new sector commitments During a recent CBI hosted Trade Association roundtable with BEIS on sector deals, members and officials discussed what a “good” sector deal could look like and how they should be prioritised by government. Other key factors included •Clear leadership-A key part of that leadership will be in ensuring appropriate and proportionate arrangements to implement the commitments in the deal. •Self-defined sector •Sector champions •Good governance What should the content of a sector deal look like? •Proposals should be original/innovative The proposed deals should include a rigorous analysis of the comparative strengths and weaknesses of the sector •Lift and include the entire sector with an eye to supply chains and SMEs(A Sector Deal cannot be restricted to incumbents; it must show how it will bring in new entrants and challengers.) •Focused number of proposals within a deal, not a laundry list, but iterative so can be built on over time
- The establishment of the industry-led Automotive Council in 2009 has provided a strong, collaborative platform from whichindustryand government are able to work together. In 2013, they published the sector Industrial Strategy: Driving Success. This in turn led to a number of measures including the establishment of the Advanced Propulsion Centre (APC) to facilitate collaboration on low-carbon propulsion systems. With £1bn invested by government and industry over 10 years, it is based in Coventry, the heart of the automotive cluster in the West Midlands. The strength of this strategy has helped the automotive sector become one of the most successful sectors post-recession: In 2015 UK car manufacturing hit a 10-year high with nearly 1.6 million vehicles, 77% of which were for export and the sector employs 770,000 people across the UK. Automotive was announced as one of the first sector deals. Involves: Focus on electrification, connected and autonomous vehicles alongside supply chain competitiveness. (reference to the Budget) This includes a commitment to rolling out an industry-led supplier improvement programme that will target areas where businesses need to improve to match the best in Europe. The programme will provide bespoke training and enhanced business processes to help build the vertically integrated supply chain we need in the UK to manufacture the future generation of vehicles at volume.
- The life sciences industry comprises of pharmaceuticals, medical technology and medical biotechnology. It also has a strong R&D base, with 25% of R&D expenditure in the UK occurring in the sector. It was one of the first sector strategies to be implemented by the government in 2011. The strategy was underpinned by three pillars: building an ecosystem for the sector, attracting and developing talent and overcoming barriers and creating industry incentives. The Cell and Gene Therapy Catapult plays a starring role in the strategy alongside the Biomedical Catalyst, a partnership between the MRC and Innovate UK, funding competition for SMEs in the sector to helpbringresearch to market. Since the formation of the Catapult, it has established the UK as a world leader in cell therapy. Among the innovative projects that have been launched, the Catapult is currently building a manufacturing centre that is designed for businesses that are looking to scale-up the manufacturing of cell or gene therapy and – something that is expected to generate £1.2bn of revenue by 2020, with the vast majority via export. The government and the life sciences sector have agreed to a transformative, multi-billion pound Sector Deal, ensuring that the UK remains at the forefront of innovation in this sector. What in the deal? Reinforcing the UK Science offer - several example of private sector investment already including MSD (Merck) announcing a commitment to establishing a state of the art life sciences discovery research facility. Health Advanced Research Programme – aim to find solutions to major healthcare challenges Manufacturing – growing UK manufacturing with an eye on exports Data – digital innovation hubs They will create controlled environments for real-world clinical studies, the application of novel clinical trial methodology, and the comprehensive evaluation of new innovations so that patients can benefit from scientific breakthroughs much faster NHS collaboration continues to be vital to the development of the sector. Skills – particularly through reforms to technical education (t-levels). Infrastructure and clusters – Growing research clusters, for example the Oxford, Milton Keynes and Cambridge corridor.
- It is important to note that a “good” sector dealshould alsobring in local actors like LEPs, combined authorities and Metro Mayors. From oil and gas and financial services in Scotland to aerospace in the south-west, the UK has world class industrial strengths across the length and breadth of the country capable of competing abroad to deliver growth at home. With the trend towards devolution and the agreement of a number of City Deals over the last few years, a number of important policy levers that can help to deliver an effective industrial strategy are now at the level of nations and regions, including skills, innovation and infrastructure. If an industrial strategy is to be more than the sum of its individual parts, it is more critical than ever that the devolution agenda is seen as an opportunity to ensure that regional initiatives join up with a national strategy to deliver policies that are tailored to each part of the UK’s industrial strengths. This will also help sector build on regional strengths and support local businesses and their supply chains by unlocking access to regional talent and skills. The Government are launching a new competitive £115m Strength in Places Fund They will look to agree Local Industrial Strategies that build on local strengths and deliver on economic opportunities The CBI is planning to bring together business leaders, in regions across the UK to identify early priorities forregional/localindustrial strategies and will be working closely with the metro mayors to align priorities where possible.
- Building successful sectors also means using a mixture of horizontal policies to encourage specific activities such as innovation, exports and investment in productivity This should be combined with a tailored approach in partnership with business to support activities in specific sectors, seeking to improve the business environment by ‘tilting the playing field’ in the favour of sectoral strengths.
- As highlighted earlier there are a number of vertical interventions that can be taken to tilt the playing field in favour of sectoral strengths. I want to focus on a few of those this afternoon: Public procurement Initiatives to tackle sector skills shortages Innovation in specific technologies and theircommercialisation
- Through the industrial strategy Government has the opportunity to make sure that the public sector’s commercial behaviours support their strategic aims and the growth of world classsectors. Theopportunity to drive innovation in public procurement is especially strong, given the need to adopt new approaches to meet challenges faced by public services. Attracting private sector bids requires good public sector commercial practice, such as pre-market engagement and business retention of IP During this critical time the CBI has been conveying to government business concerns that the publicsectormarketplace is becoming less attractive. We hear from members that despite government’s rhetoric around an ambitious plan for public service transformation, dialogue on this agenda has slowed and issues are still being seen in government’s commercial behaviours In some areas, contracts are being extended like-for-like by default, with little consideration for specific customer requirements and progress towards the ultimate end goal of transformation. Government is less likely to engage in sufficient pre-market engagement with time and capacity being stretched in light of EU renegotiation demands. These issues combined with existing challenges in the market such as the disproportionate risk profile of contracts and the political and reputational challenges of working with government, means that government is becoming a less attractive customer, with many firms increasingly looking to do business with private and overseas markets. the Cabinet Office is chiefly a value for money regulator and asking it to also champion competitive supplier markets sends mixed signals, especially when the business department has historically had limited engagement with this £278bn marketplace. This lack of committed sponsorship diminishes appetite for bidding for contracts at a time when public services need innovation more than ever. Encouragingly, both the green and white papers recognise the importance of getting procurement right. In particular: The government has committed to improve public procurement as an important source of finance for innovative businesses. As a first step, they have announced a newGovTechCatalyst with aGovTechFund of up to £20m over three years, which will use SBRI to support tech firms to provide the government with innovative solutions for more efficient public services They have also worked hard to implement the ‘balanced scorecard’, approach which requires procurers to consider relevant social and economic objectives, such as skills development, diverse supply chains and sustainability, alongside cost-effectiveness To further boost procurement standards, they are extending the Commercial Capability Development Programme to arms length bodies and will improve our procurement tools to make public sector contracts more accessible for SMEs Government has also made further commitments to improving our digital procurement platforms to make it easier for suppliers to do business with the government – for example through implementation of the Crown Marketplace purchasing platform. Recommendations The CBI welcomes these steps but in addition would also call for government to designatea BEIS minister as “minister for government suppliers”, with a brief to attract greater interest in contracts by championing companies that support public services, and work across government to support a vibrant and competitive contracting environment. This role should be complementary to the Cabinet Office, which should focus on its quasi-regulatory functions. In early 2018, the CBI will also be surveying its members to gather further evidence on the state of the public marketplace in different sectors.
- As I mentioned earlier, skills are an increasingly urgent priority. The drive towards a more productive, higher-value economy means the UK will require a workforce equipped with more and higher levels of skills. Businesses, however, are already reporting skills shortages across sectors and when it comes to filling skilled roles in the future, businesses are not confident they will be able to find sufficient recruits. Recent research from the CBI found that well over half of businesses (61%) are not confident there will be enough people available in the future with the necessary skills to fill their high-skilled jobs These concerns are also affecting businesses of all sizes and sectors Just over a third of SMEs (38%) are confident there will be enough of the right people available. But more than half of SMEs (53%) fear that in the coming years there will not be enough people to fill their high-skill jobs (giving a negative confidence balance of -15%). Among the largest businesses with 5,000 or more employees, the negative balance of confidence about the future availability of high-skilled people climbs to -34%. SECTORS In manufacturing (Exhibit 4.7), confidence about being able to recruit sufficient highly skilled staff in future remains overwhelmingly negative (with a negative balance of -49% in 2017). Similarly, among construction businesses the confidence balance stands at -49%. Among professional services firms, confidence about the future availability of high-skilled people has dropped from a positive confidence balance of +3% in 2015 to -13% in 2017. What are the main drivers of skills gaps? Strong competition for candidates with appropriate qualifications (62%) and a lack of candidates with appropriate qualifications (55%) are identified as the most widespread issues employers face. Ranking almost as high are the lack of awareness among young people of education routes to enter particular careers (50%) and careers advice poorly aligned to the sector (49%). These findings highlight the need to improve careers advice. They also show businesses and providers of education and training must work much more closely together to ensure apprenticeship and other technical or professional programmes properly reflect business needs. The poor alignment of careers advice is seen as a particularly widespread concern in certain sectors. For example more than half of manufacturing firms (56%) and three quarters of construction businesses (77%) see this as a main driver of skills gaps in their sectors. SO… Need to see more engagement with business to raise young people’s work awareness and to raise the quality of careers advice. Linkback toBrexit and balancing need for highly skilled workers with need for non-graduates in a number of sectors – seasonal labour etc. White paper moves Commits government to investing an additional £406m in maths, digital and technical education. This aims to help to address the shortage of science, technology, engineering and maths (STEM) skills It also creates a new National Retraining Scheme (TUC and CBI involved in this) that supports people to re-skill, beginning with a £64m investment for digital and construction training
- In addition, innovation has to be at the heart of the new industrial strategy and this will require increase adoption of technology across sectors. In a recent CBI survey 94% of businesses stated that digital technologies are a crucial driver of increased productivity. For some businesses in some sectors this will mean adopting a new CRM system, or building extra functionality into their websites, while for others it will increasingly mean adopting greater automation, robotics and artificial intelligence. TheUK ranks 5th in the availability of technology, but only 14th on company level adoption, which suggests that there is significant scope for UK firms to invest in newtechnology. At the other end of the scale, low take-up of readily available technologies and management best practices is also driving the UK’s productivity problem. While the UK’s best performing firms are highly innovative, best practice must reach a greater range of businesses , improving productivity through the adoption of technologies and ideas that are proven. (Cloud computing, CRM and ERP Systems) The UK’s performance on taking up digital technology lags European leaders. In 2015, the proportion of UK firms adopting cloud computing was nearly 30 percentage points below Europe's best performers. As well as adopting existing technologies, sectors’ competitive advantage depends on their ability to invest in R&D and develop and commercialise newideas. The CBI therefore welcome the strong commitment to investing in science, research and innovation in the government’swhite paper This has included: Raising the total R&D investment to 2.4 per cent of GDP by 2027 (and 3% in the longer term)which has been a key ask from the CBI in the past Increasing the rate of R&D tax credit to 12 per cent Investing £725m into new Industrial Strategy Challenge Fund programmes to capture the value of innovation In addition, Innovate UK will pilot new ways of financing innovation: -£50m Innovation Loans pilotover the next two years to target the most promising projects in viable businesses on the cusp of commercialisation, but not yet ready to access loans from commercial lenders andanInvestment Accelerator pilotto bring in seed equity alongside grant funding by matching the most innovative early stage businesses with investors.
- Finally, it isn’t possible to consider the development of world class sectors without looking at it through the lens of Brexit and the ongoing negotiations. Securing a comprehensive new economic relationship between the UK and the EU matters for the whole economy. Without this new relationship, and a transitional arrangement that provides certainty until this new relationship is in force, businesses in every sector will face a serious economic cliff-edge. Tariffs If no deal is struck, one of the forms barriers would take would be the tariffs that the remaining EU member states would be legally obliged to place on imports from the UK. Overall, in a “no deal” scenario, the UK would face tariffs on 90% of its EU goods exports by value. CBI estimates suggest that if UK-EU trade were carried out under WTO Most Favoured Nation terms, the average tariff on UK exports to the EU (weighted by 2016 exports) would be 4.3%, but some of the UK’s exports would experience tariff rates significantly higher than the average rate. Agricultural and food products, the automotive industry and textile businesses would face particularly high tariffs, which risks damaging the competitiveness of important sectors. Non-tariff barriers Higher tariff costs are just the tip of the iceberg. Even if the UK can secure a deal promising tariff-free trade in goods with the EU, UK businesses could still face new paperwork requirements and restrictions on their freedom to operate across borders. This is true in almost every sector – but there is a significant degree of variation in the impact NTBs would have between different sectors. Companies in sectors such as food, chemicals, aerospace and automotive would face particularly high NTBs. Some services sectors could lose their legal basis to export If the UK is unable to secure agreements covering access to the single market in services, companies in some of our most successful exporting sectors would be unable to export specific types of services at all. Those industries include financial services, airlines, broadcasting and a range of professional and business services. So… In the short term transitional arrangements will reduce uncertainty for businesses It is vital for British business to avoid a regulatory “cliff-edge”, where UK trade with EU suddenly defaults to a WTO framework, implying a return of tariffs and a host of other barriers to trade. In the long-run, the UK government must negotiate a “bold and ambitious” free trade agreement (FTA) that keeps trade tariff-free.
- POST-BULLETS The time is right – as we redefine our relationship with Europe and the rest of the world, the UK must focus on being competitive in a fast moving global environment. Our members are clear that to do this Government and industry must work together in a new era of partnership. Government’s industrial strategy provides a great starting point for this . The CBI urges the Government to continue on this road, moving fast from strategy to action. Two important tests of success will be that all regions and nations have successful industrial strategies, and that it is supported and not harmed by Brexit. There must be no missed turns on the path to UK 2030”. Thank you and I look forward to taking any questions you may have.